One of the fundamental policies of the SEC in enforcement matters is that the agency does not comment on the existence or status of an ongoing investigation. Usually the first public indication of an insider trading case, for example, is the defendant's acknowledgment of having received a Wells notice or the SEC's announcement that it has filed a lawsuit against the defendant. Among other things, this policy protects defendants from having their names connected to potential insider trading before the SEC has completed its investigation and decided that grounds actually exist to pursue a case.

In the UK, however, new legislation is now being proposed that would allow its securities regulator to publicize insider trading and other investigations at their initial stage. This so-called “early publicity” power would be granted to the FCA, the successor to the Financial Services Authority, Complinet reports. Presently, the FSA may publicize enforcement actions at either the decision notice or final notice stages.

On Thursday, the government stated that it intends to publish draft legislation in the spring that will permit (but not require) the FCA to publish that a warning notice (issued at the initial stage of an investigation) has been issued, as well as give a summary of the notice. The government's stated rationale for this is that early publication will “increase the visibility of the actions [the FCA] is taking to protect consumers' interests, while at the same time giving firms greater insight in to the actions taken and their eventual outcome.”  To further procedural fairness, the government stated that if the FCA ultimately decided not to take action in the matter, it would be required to issue a “notice of discontinuance.”

UK defense attorneys are, predictably, not in favor of the planned legislation. Some attorneys quoted in the Complinet story complained that the legislation will violate due process and others called it "dangerously close to being guilty until proved innocent.” Steven Francis, a partner at Reynolds Porter Chamberlain, told Reuters that such early notice of investigations could "do serious damage to the firm's reputation and business." He observed that the FSA "regularly commences investigations that lead to no disciplinary outcome. The firm either satisfies the FSA there has been no wrong-doing; or the FSA simply gets it wrong."

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